Port communicationCompany valuation methods generally fall into two categories:：One is the relative valuation method，It is characterized by mainly using the multiplier method，Relatively simple，Such as P/E valuation method、P/B valuation method、EV/EBITDA valuation method、PEG valuation method、price-to-sales valuation method、EV/sales revenue valuation method、RNAV valuation method；The other type is the absolute valuation method，The characteristic is that the discount method is mainly used，such as the dividend discount model、free cash flow model etc.。
Hong Kong Xintong-Today I will introduce to you ten company valuation methods，Let’s learn together!
Xinben Consulting Group： When valuing through the price-to-earnings ratio method，First, the earnings per share of the company being evaluated should be calculated；Then based on the average price-to-earnings ratio of the secondary market、The industry situation of the company being evaluated (price-to-earnings ratio of stocks of companies in the same industry)、The company's operating conditions and growth potential and other proposed P/E ratios (the P/E ratio of unlisted companies is generally discounted based on the P/E ratio of comparable listed companies)；at last，Valuation is determined based on the product of price-to-earnings ratio and earnings per share：Reasonable stock price = earnings per share (EPS) x reasonable price-to-earnings ratio(P/E)。
logically，Under P/E valuation method，Absolutely reasonable stock price P = EPS × P/E；The stock price is determined by the product of EPS and reasonable P/E value。Under other conditions unchanged，The higher the estimated EPS growth rate，The higher the reasonable P/E value will be，If it is absolutely reasonable, the stock price will rise；High EPS growth stocks enjoy high reasonable P/E，Low growth stocks enjoy low reasonable P/Es。
therefore，When the actual EPS growth rate is lower than expected(The multiplicand becomes smaller)，Reasonable P/E value drops(multiplier becomes smaller)，Small double whammy due to multiplier effect，Stock price plummeted。therefore，When a company's actual growth rate is higher or lower than expected，Stock prices often rise or fall sharply，This is actually the multiplier effect of the P/E valuation method at work.。
visible，The higher the P/E ratio is not, the better，Because it depends on the net profit，If the company's net profit is only a few hundred thousand or the earnings per share is only a few cents，A high price-to-earnings ratio only reflects the company's high risk profile，Be careful when investing in such stocks。from a practical point of view，It can be considered that only when the price-to-earnings ratio is equal to or preferably lower than the company's ordinary earnings per share growth rate，Make an equity investment in a company。
This means，If a company's earnings per share growth rate is 10%，Then you can only pay a maximum of 10 times the purchase price of the income.，This approach is based on an assumption，That is, a high-growth company has greater value than a low-growth company。This also led to a consequence，An equity deal that closes at a high P/E ratio does not necessarily pay a higher price than a deal with a low P/E ratio.。
The applicable environment for the P/E multiple method is a relatively complete and developed securities trading market.，There must be comparable listed companies，and the market prices these assets correctly on average。China's securities market is not yet fully developed，Market price has a weak reflection effect on company value，The external environmental conditions for using the price-to-earnings ratio method are not very mature.。
Because high-tech enterprises are in the process of profitability、Going concern、It is quite different from traditional enterprises in terms of integrity and risk.，When choosing the price-to-earnings ratio method to evaluate the value of a company，Pay attention to the flexible application of high-tech enterprises in different growth stages.。
two、The P/B valuation method is the basis for estimating the company's stock price from the perspective of the company's asset value.，Valuation of stocks of companies such as banks and insurance companies whose assets and liabilities are mostly composed of monetary assets，It is more appropriate to analyze in terms of P/B。
When valuing through the price-to-book ratio pricing method，First, the net assets per share of the company being valued should be calculated based on the audited net assets.；Then based on the average price-to-book ratio of the secondary market、The industry situation of the company being valued (price-to-book ratio of stocks of companies in the same industry)、The company's operating conditions and its return on net assets and other proposed issuance price-to-book ratios (the price-to-book ratio of unlisted companies is generally discounted based on the price-to-book ratio of comparable listed companies)；at last，The valuation is determined based on the product of the issue price-to-book ratio and net assets per share.。
The formula is：Reasonable stock price = net assets per share x reasonable price-to-book ratio(PB)。The P/B valuation method is mainly applicable to those intangible assets whose income、Companies where cash flow and value creation play a key role，such as banking、Real estate industry and investment companies, etc.。These industries all have one thing in common，That is, although they operate large-scale assets, their profits are relatively low.。
High-risk industries and highly cyclical industries，Companies with large amounts of fixed assets and relatively stable book values。 three、EV/EBITDA Valuation Method in the 1980s，With the wave of leveraged buyouts，EBITDA was widely used by investors in the capital market for the first time。But at that time, investors viewed it more as an indicator of a company’s solvency.。
over time，EBITDA begins to be widely accepted by the industrial community，Because it's great for evaluating some huge upfront capital expenditures，And industries that require amortization of upfront investment over a long period of time，For example, the nuclear power industry、Hotel industry、Property rental industry, etc.。now，More and more listed companies、Analysts and market commentators recommend investors use EBITDA for analysis。
First private equity firm uses EBITDA，regardless of interest、taxes、Depreciation and amortization，It's because they want to replace them with numbers they think are more accurate，They remove interest and taxes，It’s because they have to use their own tax rate calculation methods and financial cost calculations under the new capital structure.。
EBITDA excludes amortization and depreciation，This is because amortization includes the cost paid when acquiring intangible assets in previous accounting periods.，It is not the current cash expenditure that investors are more concerned about.。And depreciation itself is an indirect measure of past capital expenditures.，After excluding depreciation from the profit calculation，Investors can more easily focus on estimates of future capital expenditures，rather than the sunk costs of the past。
therefore，EBITDA is often compared to cash flow，Because the difference between it and net income (EBIT) is two expense items that have no impact on cash flow.，i.e. depreciation and amortization。However,Since the cash requirements for replenishing working capital and replacing equipment were not considered，Moreover, non-cash items that are not adjusted in EBITDA include provisions for bad debts.、Provision for inventory impairment and stock option costs。
therefore，It is not possible to simply equate EBITDA with cash flow.，otherwise，It’s easy to lead a company astray。 EV/EBITDA was first used as a pricing standard for mergers and acquisitions，Now widely used to assess company value and price stocks。
The company value here is not the asset value，It's business value，How much does it cost to buy a going concern?，This amount not only includes a valuation of the company's earnings，Also includes company liabilities to be borne。Enterprise value is considered to be a more market-oriented and accurate standard of company value.，Its derived valuation indicators such as EV/sales、EV/EBITDA, etc. are widely used in stock pricing。
Four、PEG valuation method PEG is developed on the basis of P/E valuation method，It is an indicator that combines the price-earnings ratio with the company's growth rate.，It makes up for PE's shortcomings in estimating the dynamic growth of enterprises.。
Given that many companies’ investment returns、Non-operating income is unstable，And the reality that some companies use investment income to manipulate net profit indicators，For reasons of robustness，The growth rate of net profit can be replaced by the growth rate of pre-tax profit/the growth rate of operating profit/the growth rate of revenue/the annual growth rate of earnings per share。 The focus of PEG valuation is to calculate the safety of the stock's current price and the certainty of predicting the company's future earnings.。
If PEG is greater than 1，The stock may be overvalued，Or the market believes that the company's performance growth will be higher than market expectations；If PEG is less than 1(The smaller the better)，This indicates that the stock price is undervalued。
Usually the PEG of growth stocks after listing will be higher than 1 (that is, the price-to-earnings ratio is equal to the net profit growth rate)，Even above 2，Investors are willing to give it high valuations，Indicates that the company is likely to maintain rapid growth in the future，Such stocks can easily have a price-to-earnings ratio valuation beyond imagination.。
Because PEG needs to make judgments on performance growth for at least the next three years，Instead of just using profit forecasts for the next 12 months，This greatly increases the difficulty of accurate judgment.。in fact，Only when investors are confident in making relatively accurate predictions of performance over the next three years or more，The effect of using PEG will be reflected，Otherwise it will be misleading。
also，Investors can't just look at a company's own PEG to determine whether it's overvalued or undervalued，If the PEG of a certain company's stock is 12, and the PEG of the stocks of other companies in the same industry with similar growth are all above 15，Although the company's PEG is already higher than 1，But the value may still be undervalued。
certainly，Nor can we mechanically judge valuation solely based on PEG.，It must also be combined with the international market、Macroeconomics、national industrial policy、Industry boom、Capital market stage hot spots、Different areas of the stock market、Comprehensive evaluation based on various factors such as the sustainability of the listed company's profit growth and other internal conditions of the listed company.。five、P/S valuation method The price-to-sales ratio metric can be used to determine the value of a stock relative to past performance.。
The price-to-sales ratio can also be used to determine relative valuation within a market sector or the stock market as a whole.。The smaller the price-to-sales ratio (for example, less than 1)，It is generally considered that the higher the investment value，This is because investors can pay less per unit of operating income to buy the stock.。 Price-to-sales ratios vary greatly among different market sectors.，So the price-to-sales ratio is most useful when comparing stocks in the same market sector or sub-sector.。
same，Since operating income is not as easy to manipulate as profit，Therefore, the price-to-sales ratio is more indicative of performance than the price-to-earnings ratio.。But the price-to-sales ratio does not reveal the entire business situation，Because the company may be losing money。The price-to-sales ratio is often used to value the stocks of loss-making companies.，Because there is no price-earnings ratio for reference.。In an era when almost all Internet companies are losing money，People Use Price-to-Sales Ratios to Value Internet Companies。
The advantage of the P/S valuation method is that sales revenue is the most stable，Low volatility；And operating income is not subject to corporate depreciation、stock、The impact of non-recurring revenue and expenditure，Not as easy to control as profit；There will be no negative income，There will be no meaningless situations，Can be used even if net profit is negative。so，The price-to-sales ratio valuation method can form a good complement to the price-to-earnings ratio valuation method.。
The disadvantages of the P/S valuation method are：It cannot reflect the company's cost control capabilities，Even if costs rise、Profits fall，Does not affect sales revenue，Price-to-sales ratio remains unchanged；The price-to-sales ratio will decrease as the company's sales revenue expands.；Companies with large operating income，Low price-to-sales ratio。
six、EV / Sales valuation method: stocks with high market-to-sales ratios have higher relative values，Rating based on market sales rate，Give a rating between 0 and 100，The higher the market-to-sale ratio score，The corresponding stock value is also higher。
The price-to-sales ratio calculated using price per share/sales per share can clearly reflect the potential value of GEM-listed companies.，Because in an increasingly competitive environment，A company's market share plays an increasing role in determining its viability and profitability，The price-to-sales ratio is an important indicator for evaluating the stock value of listed companies.，Its basic model is： Indicators are comparable：Although the company's profits may be low or not yet profitable，But any company’s sales revenue is positive，The price-to-sales ratio indicator cannot be negative。
therefore comparable。 The principle and usage of price-to-sales ratio (EV/Sales) and price-to-sales ratio (P/S) are the same，It is mainly used to measure the value of a company whose profit margin is temporarily lower than the industry average or even in a loss-making state.，The prerequisite is that investors expect the company's profit margins to reach the industry average in the future。
Sales revenue is used with the intention that sales revenue represents market share and company size.，If a company can effectively improve its operations，Will be able to achieve industry average or expected profitability levels。This indicator can only be used to compare companies within the same industry，After comparing and combining performance improvement expectations to arrive at a reasonable multiple，times sales per share，You can get a target price that is consistent with the company’s value.。
seven、RNAV valuation method RNAV means revalued net assets，Calculation formula RNAV = (property area × average market price - net debt) / total equity。Property area，Average price and net debt are both important parameters that affect RNAV value.。The RNAV valuation method is suitable for real estate companies or companies with a large number of self-owned properties。
Its meaning is how much the company's existing properties should be worth if sold at market prices.，If the money spent to buy the company is less than the money the company receives from selling its own properties at market prices，This indicates that the company's stock is undervalued in the secondary market。 Conduct market-based value analysis of each company's assets，Reinterpret the company's intrinsic long-term investment value from the perspective of asset value。
Share price relative to its RNAV，If there is a large discount phenomenon，Shows that its stock price is significantly undervalued relative to the company’s true value。Higher gearing ratio (excessive long-term and short-term borrowing liabilities) and larger equity will reduce RNAV value。 eight、DDM valuation method, absolute valuation method，The DDM model is the most basic model，The most mainstream DCF method at present also draws heavily on some logic and calculation methods of DDM.。
Theoretically，When a company's free cash flow is used entirely for dividend payments，There is no essential difference between the DCF model and the DDM model；But in fact，Whether in China, where the dividend rate is low, or in the United States, where the dividend rate is high，Dividends cannot be equal to the company's free cash flow，There are four reasons：(1)stability
Require
，The company is uncertain about its ability to pay high dividends in the future；(2)The need for continued investment in the future，The company anticipates possible capital expenditures in the future，Preserve cash to eliminate the inconvenience and expense of financing；(3)tax factors，Capital gains tax or personal income tax in foreign countries that implement a relatively progressive system；(4)Signal characteristics，The market generally believes that "corporate dividends are rising，The prospects are promising；Dividends fall，Indicating that the company's prospects are bleak"。
The dividend ratio of listed companies in China is not high，The proportion and amount of dividends are not stable，This situation is unlikely to improve in the short term.，The DDM model is basically not applicable in China。Nine、DCF Valuation Method The most widely used DCF valuation method provides a rigorous analytical framework.，Systematically consider every factor that affects a company's value，Final assessment of a company’s investment value。
The essential difference between DCF valuation method and DDM is，DCF valuation method replaces dividends with free cash flow。
company free cash flow(Free cash flow for the firm )Proposed by American scholar Rappaport，Basic concepts generated for the company、remaining after meeting reinvestment needs、Without affecting the company's sustainable development、Suppliers of capital available to companies(that is, various interests
Require
people，including shareholders、creditor)distributed cash。
ten、NAV valuation methodNAV valuation is the net asset value method，Current mainstream valuation methods in the real estate industry。net asset value method，refers to a certain sales price、Under the assumptions of development speed and discount rate，The discounted cash flow value of current reserve projects of real estate companies after excluding liabilities，That is the net asset value(NAV)。
Specifically，Development property net asset value，It is equal to the discounted present value of net cash flows generated from future sales of existing development projects and land bank projects minus liabilities.；Investment property net asset value，It is equal to the value of the current project’s net rental income discounted at the set capitalization rate minus liabilities.。NAV valuation method
Advantages
Because it sets a valuation bottom line for corporate value，Especially applicable to many “real estate project companies” in the Mainland。
And NAV valuation takes into account expected price changes、Factors such as development speed and investor return rate，More accurate than simple price-to-earnings ratio comparison。But NAV valuation also has obvious shortcomings，It measures the current value of the company’s tangible assets，regardless of brand、Differences in management capabilities and business models。The popularity of NAV valuation has promoted real estate companies’ valuation of assets(land bank)excessive adoration。
Under the leadership of NAV，Many real estate companies have participated in this competition for land reserves.。Real estate companies have formed a new survival model under the "worship" of NAV：Reserve land - increase market value - raise funds - reserve land again。If you still want to know more about this aspect，Welcome to consult Hong Kong Xintong at any time!
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